Photo: Shell via Flickr
This is almost hard to believe from an American perspective, but the biggest obstacle to growth in the Candian oil sands is a labour shortage.A labour shortage and resultant cost inflation are already causing oil producers to cancel new projects, according to investment bank Raymond James.
Going forward this problem will get worse, says Raymond James’ Justin Bouchard:
Of the factors leading to a rise in cost inflation, we believe labour shortages are the most significant. This statement is by no means a revelation as labour shortages have been a challenge in the past. However, where our view may differ from the common mantra of oil sands industry participants is in the magnitude of the problem. For one, it is worth pointing out that we are already above peak employment levels experienced during the 2005-2008 oil sands boom. This time around, there is a lack of slack labour availability from the traditional labour pools for the oil sands industry (i.e. east coast Canada) and looking to the higher unemployment levels in the United States as a means to solve the problem is a false hope in our view. Furthermore, the next decade will see a transition in the makeup of the labour force in the oil sands as the older (and more experienced) baby-boomers begin to retire at an accelerating rate, leading to an increase in the overall rate of attrition within the labour force, while also leading to a loss of industry expertise as older and more experienced employees are replaced by younger and less experienced individuals. This will likely compound one of the key issues that has plagued the oil sands industry – labour productivity.
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